Suppose you were the Chief Financial Officer of WPCI Drugs and Products By 2015, WPCI had become a major player in prescription drugs with sizable market share in quite a few of them, and several blockbuster drugs WPCI also had numerous brand name home products such as Clean detergent and Chef Girlardee canned food The three pillars of WPCI's strategy were conservatism, marketing and cost control WPCI consistently avoided much of the risk of product development and introduction in the volatile drug industry Most of its new products were acquired or licensed after their development by other firms Others were copies and clever extensions of products introduced by competitors WPCI's success was built on its expertise in marketing, which eroded its competitors headstart, and on cost control, which ensured substantial margins The results were impressive Selected financial data for WPCI (in $ millions) 2011 2012 2013 2014 2015 Sales 2,471 7 2,685 1 3,062 6 3,406 3 3,798 5 Net Income 277 9 306 2 348 4 396 0 445 9 Earnings Per Share 1 75 1 94 2 21 2 51 2 84 Dividend Per Share 1 00 1 15 1 33 1 50 1 70 Cash 357 8 322 9 436 6 493 8 593 3 Total Assets 1,510 9 1,611 3 1,862 2 2,090 7 2370 3 A P and other noninterest bearing liabilities 511 60 565 70 670 50 758 40 883 60 Long term Short term debt 7 8 10 3 13 7 10 3 13 9 Net Worth 991 5 1,035 3 1,178 0 1,322 0 1,472 8 Balance Sheet 2015 Assets Liabilities and Equity Cash and Cash Equivalents 593 3 A P and other non interest bearing liabilities 883 6 Accounts receivable 517 3 Long term Short term debt 13 9 Inventory 557 3 Total Liabilities 897 5 Plant, Property Equip 450 5 Others 251 9 Net Worth 1,472 8 Total Assets 2,370 3 Total Liabilities Net Worth 2,370 3 Describe WPCI's capital structure for the period from 2011 to 2015 What are the likely factors leading to this capital structure (Hint Consider WPCIs sustainable growth and its underlying components) 2 Based on the information given above, is this capital structure likely to be optimal If yes, explain its merits relative to alternative capital structures If not, discuss this capital structures main drawbacks, as well as the relative merits of the different possible paths to a more suitable capital structure

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Suppose you were the Chief Financial Officer of WPCI Drugs and Products. By 2015, WPCI had become a major player in prescription drugs with sizable

Suppose you were the Chief Financial Officer of WPCI Drugs and Products. By 2015, WPCI had become a major player in prescription drugs with sizable market share in quite a few of them, and several "blockbuster" drugs. WPCI also had numerous brand name home products such as Clean detergent and Chef Girlardee canned food.

The three pillars of WPCI's strategy were conservatism, marketing and cost control. WPCI consistently avoided much of the risk of product development and introduction in the volatile drug industry. Most of its new products were acquired or licensed after their development by other firms. Others were copies and clever extensions of products introduced by competitors. WPCI's success was built on its expertise in marketing, which eroded its competitors headstart, and on cost control, which ensured substantial margins. The results were impressive. Selected financial data for WPCI (in $ millions):

	2011	2012	2013	2014	2015
Sales	2,471.7	2,685.1	3,062.6	3,406.3	3,798.5
Net Income	277.9	306.2	348.4	396.0	445.9
Earnings Per Share	1.75	1.94	2.21	2.51	2.84
Dividend Per Share	1.00	1.15	1.33	1.50	1.70
Cash	357.8	322.9	436.6	493.8	593.3
Total Assets	1,510.9	1,611.3	1,862.2	2,090.7	2370.3
A/P and other noninterest-bearing liabilities	511.60	565.70	670.50	758.40	883.60
Long-term + Short-term debt	7.8	10.3	13.7	10.3	13.9
Net Worth	991.5	1,035.3	1,178.0	1,322.0	1,472.8

Balance Sheet 2015
Assets		Liabilities and Equity
Cash and Cash Equivalents	593.3	A/P and other non-interest bearing liabilities	883.6
Accounts receivable	517.3	Long-term + Short-term debt	13.9
Inventory	557.3	Total Liabilities	897.5
Plant, Property & Equip.	450.5
Others	251.9	Net Worth	1,472.8
Total Assets	2,370.3	Total Liabilities + Net Worth	2,370.3

Describe WPCI's capital structure for the period from 2011 to 2015. What are the likely factors leading to this capital structure? (Hint: Consider WPCIs sustainable growth and its underlying components).

2. Based on the information given above, is this capital structure likely to be optimal? If yes, explain its merits relative to alternative capital structures. If not, discuss this capital structures main drawbacks, as well as the relative merits of the different possible paths to a more suitable capital structure.